AM Chapter 07

8/4/2019 AM Chapter 07

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Advertising and Movement Toward Action

ConativeRealm of motives.

Ads stimulate or direct

desires.

AffectiveRealm of emotions.

Ads change attitudes

and feelings

CognitiveRealm of thoughts.

Ads provide

information and facts.

Purchase

Conviction

Preference

Liking

Knowledge

Awareness

Point of purchaseRetail store ads, DealsLast-chance offersPrice appeals, Testimonials

Competitive adsArgumentative copy

Image copyStatus, glamour appeals

AnnouncementsDescriptive copyClassified adsSlogans, jingles, skywriting

Teaser campaigns

Related behavioraldimensions Movementtowardpurchase Types of promotions andadvertising at each step


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Inverted Pyramid of Communications

Effects

90% Awareness

70% Knowledge

40% Liking

25% Preference

20% Trial

5% Use

Conative

Cognitiv

eAffective


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Setting Objectives Using the

Communications Effects Pyramid Product: Backstage Shampoo

Time period: Six months

Objective 1: 90% awareness Objective 2: 70% interest

Objective 3: 40% positive feelings and 25%

preference Objective 4: 20% trial

Objective 5: 5% main regular use


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The DAGMAR Approach

Define

AdvertisingGoals for

MeasuringAdvertising

Results


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Communication Tasks Four stages

Awareness Comprehension ConvictionAction


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Characteristics of Objectives

Concrete, Measurable Communication Tasks

Well-Defined Target Audience

Have an Existing Benchmark Measure

Specify Degree of Change Sought

Specific Time Period

Good Objectives Should Include:Good Objectives Should Include:


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DAGMAR Difficulties

Response HierarchyProblems Doesn't always define the

process people use to reachpurchase/use.

Attitude - BehaviorRelationship Attitude change doesn't

always lead to change inactions or behavior.

Sales Objectives Are

Needed Sales are all that really

counts, not communicationsobjectives.

Costly and Impractical The research and efforts

cost more then the results

are worth.

Inhibition of Creativity Too many rules and

structure curb genius.

Legitimate ProblemsLegitimate Problems Questionable ObjectionsQuestionable Objections


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The Promotional Budget Establishing the budget

Allocating the budget (budgetingapproaches)


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Establishing the budget Marginal Analysis

Sales response models

Additional factors in budget setting


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Marginal Analysis

Advertising / Promotion in $

Sales

in

$

Point A

Profit

Sales Gross Margin

Ad. Expenditure


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BASIC Principles of Marginal Analysis

I n c r ea s en c r ea s e Spending . . . IF:The increased cost is less than the incremental(marginal) return.

Dec r e a s ee c r ea s e Spending . . . IF:The increased cost is more than the incremental

(marginal) return.

Ho l do ld Spending Level. . . IF:The increased cost is equal to the incremental(marginal) return.


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Problems with Marginal

AnalysisAssumption that sales are a direct

measure of advertising and promotional

efforts.Assumption that sales are determined

solely by advertising and promotion.


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Advertising Sales/Response

Functions

Sales

Advertising Expenditures

A. Concave-DownwardResponse Curve

Sales

Advertising Expenditures

Range A Range B Range C

B. S-ShapedResponseFunction

HighSp

endin

g

LittleE

ffect

InitialS

pendin

g

LittleE

ffect

Middle

Level

HighEf

fect


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Additional Factors in Budget

Setting Figure 7-11

Figure 7-12


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Allocating the Budget Top-down budgeting

Bottom-up budgeting


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Top Management Sets the

Spending Limit

The Promotion Budget Is Set toStay Within the Spending Limit

Top-Down Budgeting


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Top-Down Budgeting

Arbitrary allocation

The affordable method

Percentage of Sales

Competitive parity

Return on investment (ROI)


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The Affordable Method

It is common among small firms andcertain non-marketing-driven large

firms. Logic: We cant be hurt with this

method.

Weakness: often does not allocateenough money.


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Percentage of Sales

Sales dollar or unit product cost

Future or past

Pros Financially safe Reasonable limits Stable


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Percentage of Sales

Cons Reverse the cause-and-effect relationship

between advertising and sales. Stability Misallocation

Difficult to employ for new productintroductions.

Sales Advertising budget


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Competitive Parity Method

Pros Take advantage of the collective wisdom of

the industry Cons

Prisoners dilemma


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Bottom-Up Budgeting

Total Budget Is Approved byTop Management

Cost of Activities are Budgeted

Activities to Achieve ObjectivesAre Planned

Promotional Objectives Are Set


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Bottom-Up Budgeting

Objective and Task Method

Payout Planning

Quantitative Models


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Three steps: Defining the communications objectives to

be accomplished Determining the specific strategies and

tasks need to attain them

Estimating the cost associated withperformance of these strategies and tasks


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Establish Objectives(create awareness of new product among20 percent of target market)

Establish Objectives(create awareness of new product among20 percent of target market)

Determine Specific Tasks(advertise on market area television andradio and local newspapers)

Determine Specific Tasks(advertise on market area television andradio and local newspapers)

Estimate Costs Associated with Tasks(television, $575,000; radio, $225,000;newspaper, $175,000)

Estimate Costs Associated with Tasks(television, $575,000; radio, $225,000;newspaper, $175,000)


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Payout Planning

To determine how much to spend,marketers develop a payoutpayoutplanplan thatdetermines the investment value of theadvertising and promotion appropriation

Example of a three-year payout plan ($ millions)

Year 1 Year 2 Year 3

Product sales 15.0 35.50 60.75Profit contribution(@$.50 per case) 7.5 17.75 30.38Advertising/promotions 15.0 10.50 8.50Profit (loss) (7.5) 7.25 21.88Cumulative profit (loss) (7.5) (0.25) 21.63

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AM Chapter 07

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